BMC waives property tax for some sections: What house owners must know

(Image: PTI)

In a move that would give respite to property owners in Mumbai, the Brihanmumbai Municipal Corporation (BMC) has announced a 100 percent waiver of property tax for houses measuring up to 500 sq ft of carpet area. This announcement was made in BMC’s budget for 2022-23. More than 16 lakh owners of houses in the financial capital stand to benefit. Here’s why you need to pay property tax on time.

Property tax is not similar across the country, it differs based on several factors. “Property taxes could vary based on the property type and location, on assessed value of the property, access roads and age of the property,” says Anand Moorthy, CBO & Principal Partner - Asset Management Services & Data Intelligence, Square Yards

How is property tax calculated?

“The BMC, for instance, follows the Capital Value System. In this method, property tax is calculated on the basis of the market value of the property for different categories – residential, commercial, retail, warehouse, and so on. Municipalities of Chennai and Hyderabad follow the Annual Rental Value System where the tax is calculated based on the yearly rental value of the property. The tax here depends on the location of the property, proximity to cosmopolitan centres and landmarks and also on the amenities provided in that location by the government,” explains Moorthy.

Another way of calculating property tax is the Unit Area Value System where the tax is levied on the per unit value of the area. The unit of calculation here is per square foot per month. This type of property tax valuation is followed by municipal corporations of Delhi, Bangalore, Patna, Hyderabad and Ahmedabad. In Delhi, however, certain classes of citizens including senior citizens, physically challenged women, ex-serviceman, group housing flat owners and Central Government Health Scheme flat owners get a rebate up to 30 percent, adds Moorthy.

When and how do you need to pay Property Tax?

Typically, in most states, property taxes become due on a quarterly or half-yearly basis. However, “some governments like Delhi and Haryana give some rebate to property taxpayers if the entire tax amount is paid in one lumpsum for that assessment year,” says Moorthy.

Like most of the taxes and fees, property taxes can also be paid both offline and online. To pay it offline, “you can fill up offline property tax forms with all the details related to classification of the property, its location and dimensions, and pay the amount by submitting them with a cheque or a demand draft. Or one can go the online way by going to the portal of the respective Municipal Corporation, fill the details as asked and pay the amount via NEFT or using debit and credit cards,” says Moorthy.

What if an owner doesn't pay?

Unlike the income-tax authority, most municipalities do not follow a rigid tax collection process. Therefore, many times, home owners are left with property tax dues of several years. However, when tax dues mount, authorities issue notice and take steps to collect it from defaulters.

“Failing to pay property tax on time can attract severe penalties by the municipal corporation including auction notice. One will have to pay a penal interest on the due amount, depending upon the state one is located in,” says Moorthy.

If a defaulter fails to pay the outstanding dues including interest and penalty, within stipulated time in the notice, authorities can take other steps to recover dues.

“Outstanding tax dues comprising of the tax, interest and penalty can be recovered by the relevant municipal authorities under a warrant of distress and sale of movable properties or attachment and sale of the immovable properties belonging to the defaulter,” says Santosh Pandey, Associate at Sarthak Advocates & Solicitors.

When a warrant is issued for the attachment and sale of immovable property, normally the defaulter is prohibited from transferring or charging the property in any way. Municipal authorities are empowered to institute suit for recovery in a court of competent jurisdiction in the event of their failure to recover the same in full via warrant of distress and sale of movable properties or attachment and sale of immovable properties, adds Pandey.

You cannot get away without paying property tax, especially if you intend to sell the property. “Non-payment of property taxes can become a hassle while selling a property since the buyer will demand a complete clearance of all past tax dues before finalizing the deal. So, it’s always a good habit to pay taxes on time,” says Moorthy.